Globally, the health care industry is booming. As the population ages and the demand for quality health services intensifies, many health care organizations are experiencing sustained growth and enviable profitability. Increases in technology have enhanced the ability of science to overcome traditional obstacles and have granted ready access to millions of individuals throughout the world. Economically, the health care industry can be defined as representing approximately 15% of the nation's Gross Domestic Product (GDP), or more than $1.6 trillion in annual health care expenditures.
The increased success and activity in the health care industry has presented several obstacles, however. One such obstacle concerns the difficulty with which accounts receivables are accurately and efficiently managed. Traditionally, accounts receivables in health care have been treated in a similar fashion to receivables in other industries. Specifically, receivables are aged on a monthly basis and stratified into general current, past 30 days, past 60 days, past 90 days and past 180 days categories.
What makes health care unique, however, is the existence of a third-party payer in the receivables process, namely, the insurance company, which adds an additional layer of complexity into the process. In response to this, health care receivables management systems have implemented a dual account balance structure whereby in addition to an overall account balance for a patient's account, a patient and insurance balance are also carried. The sum of these two comprises the overall account balance. The following example illustrates this method at two stages of the receivables management process. Example—Patient with PPO coverage which pays 80% of covered charges with a $15 office-visit co-payment after payment of a $300 annual deductible, of which $280 has been met:
PatientInsuranceAccountDateEventBalanceBalanceBalanceBeginning Balance000(New Account)Jan. 1, 2002Charge for Office Visit0150150of $150Jan. 1, 2002Co-Payment for Office−15150135Visit of $15Feb. 15, 2002Insurance Payment of−157459$76 (on approved of$120)Disallowed of $30−154429Applied to Deductible of52429$20Applied to Co-Pay of20929$15Applied to Co-Ins of $929029
This example also illustrates the concept of a “billed amount” and “value,” whereby the billed amount is the retail price of the medical practitioner and the value is the amount that is reimbursed. The reason the two are different is because the practitioner is under contract with the payer, and other payers, each at different reimbursement levels for the same procedure; however, he is forced to bill the same amount to each. This helps to distort his accounts receivable and adds tremendous confusion to the task of forecasting his true reimbursement. Because he/she is under contract, the different between amount billed and “amount approved” (i.e. value) must be written-off as a contractual adjustment and cannot be billed to the patient.
Health care receivables are further complicated through the introduction of “denials.” Health care receivables are invoiced to third-party payers using both paper- and electronic-claims. These claims typically contain a number of individual charges that together represent the entirety of a patient-provider encounter. Third-party payers, however, adjudicate claims on an individual line-item basis and may therefore pay various items on a claim while denying others.
Traditionally, health care receivables management systems have made no attempt to post denials against the open receivables. Instead, they have allowed these receivables to age past 60- or 90-days before they are worked by a collector. Once a collector begins working the item, he/she must first call the third-party payer for information regarding the item and why it is still outstanding. Oftentimes, the collector waits on hold for 10 to 2 minutes before a live person attends to them. Sometimes the third-party payer informs them that the claim was never received; other times, they inform them that the claim was denied for a given reason.
Another problem with current accounts receivable management systems and methods is their failure to standardize the organization and working of payer denials. At present, for example, there are approximately 500 different reasons used by payers to deny claims. Also, current systems and methods make no distinction between how receivables are aged, e.g., insurance receivables are aged the same way as patient receivables. This presents a problem when different payers pay according to different schedules. In Florida, for example, Medicare pays in 16-21 days, Medicaid pays in 10-14 days, Blue Cross in less than 30 days and insurance companies typically pay in 45 days. This also varies depending upon whether an electronic or paper claim was submitted.
Health care collections are a particularly labor intensive process because of the level of inefficiency introduced by the third-party payers. For instance, a typical collections or eligibility telephone call may take 15 to 20 minutes due to a prolonged hold time, for example. Organization of collections items may ease the inefficiency by laying the groundwork for how collections are to take place, for example the order in which they are to be worked. Further, third-party payers deny claims for many different reasons. At present, there are approximately 500 different reasons in use. Working these one-by-one is very difficult, intrusive and inefficient.
These and other problems exist.